Due to the substantial time and effort involved in negotiating and confirming a Chapter 11 reorganization plan, and the potential for improperly solicited votes to be disqualified, plan proponents generally are well advised to adhere strictly to the plan voting and disclosure requirements of the Bankruptcy Code.  A recent Delaware bankruptcy court decision, In re Indianapolis Downs, LLC,¹ indicates that creditors who actively negotiate the terms of a debtor's reorganization can, under certain circumstances, enter into a formal plan support agreement with the debtor

A recent case¹ decided by Judge Stuart Bernstein of the United States Bankruptcy Court for the Southern District of New York demonstrates that a developer's properly crafted chapter 11 plan of reorganization can effectively "restore" trust funds that it previously had "diverted" under the New York Lien Law.